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LESSON 6

Lesson Five covers control accounts, which ensure the accuracy of ledger postings and serve various purposes such as error detection and internal checks on debtors and creditors. It details the types of control accounts, specifically the Sales Ledger Control Account and Purchases Ledger Control Account, along with their accounting treatments and illustrative examples. Additionally, it introduces the concept of contra settlement for transactions involving the same individual as both a supplier and a customer.

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3 views

LESSON 6

Lesson Five covers control accounts, which ensure the accuracy of ledger postings and serve various purposes such as error detection and internal checks on debtors and creditors. It details the types of control accounts, specifically the Sales Ledger Control Account and Purchases Ledger Control Account, along with their accounting treatments and illustrative examples. Additionally, it introduces the concept of contra settlement for transactions involving the same individual as both a supplier and a customer.

Uploaded by

karungualvismaina
Copyright
© © All Rights Reserved
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Lesson Five

CONTROL ACCOUNTS
Checks the accuracy and correctness of a
posting in a ledger to which the control account
belongs or relates to.
Uses of control accounts
1.) Detection of errors & fraud committed in the
ledger
2.) Supervision tool - quick method of senior staff
to supervise the junior staff.
3.) Internal check on accuracy of debtors and
creditors.
4.) Aids in balancing accounts
5.) Facilitates preparation of interim and final
accounts since closing balances of the
purchases, sales, debtors and creditors are
readily available from control accounts.
Types of control Accounts
[1.] SALES LEDGER CONTROL ACCOUNT/
TOTAL DEBTORS A/C
Deals with credit customers (debtors). Checks the
accuracy of posting in the sales ledger account.

Accounting Treatment (Dr. Increase & Cr.


Decrease)

Format:
NB;
- Cash transactions like cash sales and cash
purchases are not included in the control accounts.
- Provision for bad debts (non-cash item) is also not
included in the control accounts.
ILLUSTRATION I
Prepare a Sales Ledger control A/c to record the
following transactions for the month of January.
a.) Sales ledger debit bal. on 1 st Jan. Sh. 18,940
b.) Total cash sales Sh. 89,560
c.) Total credit sales for the month Sh. 102,900
d.) Total cheques received from customers Sh.
72,840
e.) Provision for bad debts Sh. 1,500
f.) Total cash received from debtors Sh. 12,360
g.) Total return inwards from debtors Sh. 2,960
[2] PURCHASES LEDGER CONTROL ACCOUNT/
TOTAL CREDITORS A/C
Deals with credit suppliers (Creditors). Checks the
accuracy of posting in the purchases ledger a/c.

Accounting Treatment (Dr. Decrease & Cr.


Increase)

Format:
ILLUSTRATION II
Prepare a Purchases Ledger Control A/c from the
following details for the month of June 2019.
a.) Purchases ledger credit balance on 1/6/2019
Sh. 3,676
b.) Total credit purchases for the month Sh. 42,257
c.) Total cash purchases Sh. 52,300
d.) Return outwards Sh. 1,098
e.) Cheques paid to credit suppliers Sh. 38,765
f.) Discounts received from suppliers Sh. 887
g.) Purchases ledger credit balance as at
30/6/2019 Sh. 5,183
CONTRA SETTLEMENT
Occurs when the same person is both a supplier &
a customer. The business will offset the amount it
owes the person from what the person owes the
business.

ILLUSTRATION III
A business sold item X to Jack at Sh. 800 on credit and
Jack supplied item Y to the business at Sh. 1000 on
credit.
ILLUSTRATION IV
The information below was obtained from JJ traders as
at 31/12/2019. Balances as at 1st Jan. 2019 are as
follows;
Required:
Prepare sales ledger and purchases ledger control
accounts
End

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